Microsoft, an enormous company which produce hardware and software, operates around the world, and very few companies can compete with Microsoft’s technology due to barriers to entry and its extensive customer and developer base in the market. This situation is called the monopoly. Monopoly is “a term used to refer single supplier in a market. For regulation, monopoly power exists when a single firm controls 25% or more of a particular market.” In this kind of market, a seller is called as price maker as there is a single seller in monopoly who controls the prices in particular product and services. A lot of economists have the different opinion whether monopoly should be permitted or not as monopoly may be good or it may be bad for the economy
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The first is that the firms must be able to identify different distinct groups of consumers. Secondly, firms need to be in a position of market power to set prices, which excludes the possibility of price discrimination in a perfectly competitive market as firms operating under such circumstances will not have pricing power. The last requirement is that firm should limit re-selling from low-price customer to high-priced customers. Travel industry can be a good example of price discrimination. Most of the airlines and other travel companies differentiated pricing very often. Travel products and services are marketed to specific social segments. Airlines usually charge more or less for the plane ticket based on various booking classes and time of the level; time of day, a day of a week, time of year. For more detail, many international students are studying in the UK. Airplane ticket in Christmas holiday from the UK to another countries are almost twice more expensive than usual days as airline companies know that there will be high demand for plane ticket from those foreign students who want to go back to the home country on the holiday. The main purpose of price discrimination is to capture market’s consumer …show more content…
A discriminating monopoly is extracting consumer surplus and turning it into supernormal profit as it allows firms to capture every last dollar of revenue available from each of its customers. With this improved benefits, firms can invest in their machines, equipment and technology to improve increase aggregate supply which defines the total output of the economy which is commonly accompanied by economic growth. However, for consumers, though some groups will have a benefit from the lower price, others will subsidise the winners. In other words, consumers would lose if competitions fell because of predatory pricing by the price discriminator, but, abnormal profits allow the firm increased funding to plough back into the business, which results in new products and amelioration in quality. Consumer loss is more evident on international as multinational companies as they charge a different price in every country on the same product. As a brief illustration, the price of coca cola is different between the UK and China as the price of identical goods are decided by two countries have different average per capita income. This may be harm to who have lower income than average
The first is that the firms must be able to identify different distinct groups of consumers. Secondly, firms need to be in a position of market power to set prices, which excludes the possibility of price discrimination in a perfectly competitive market as firms operating under such circumstances will not have pricing power. The last requirement is that firm should limit re-selling from low-price customer to high-priced customers. Travel industry can be a good example of price discrimination. Most of the airlines and other travel companies differentiated pricing very often. Travel products and services are marketed to specific social segments. Airlines usually charge more or less for the plane ticket based on various booking classes and time of the level; time of day, a day of a week, time of year. For more detail, many international students are studying in the UK. Airplane ticket in Christmas holiday from the UK to another countries are almost twice more expensive than usual days as airline companies know that there will be high demand for plane ticket from those foreign students who want to go back to the home country on the holiday. The main purpose of price discrimination is to capture market’s consumer …show more content…
A discriminating monopoly is extracting consumer surplus and turning it into supernormal profit as it allows firms to capture every last dollar of revenue available from each of its customers. With this improved benefits, firms can invest in their machines, equipment and technology to improve increase aggregate supply which defines the total output of the economy which is commonly accompanied by economic growth. However, for consumers, though some groups will have a benefit from the lower price, others will subsidise the winners. In other words, consumers would lose if competitions fell because of predatory pricing by the price discriminator, but, abnormal profits allow the firm increased funding to plough back into the business, which results in new products and amelioration in quality. Consumer loss is more evident on international as multinational companies as they charge a different price in every country on the same product. As a brief illustration, the price of coca cola is different between the UK and China as the price of identical goods are decided by two countries have different average per capita income. This may be harm to who have lower income than average